Why Taiwan & Brazil Stand Out in Global ETFs

SPEAKER_1 (0:00)

It's time now for our ETF watchlist. Joining me right now, Dina Ting, Head of Global Index Portfolio Management at Franklin Templeton. And I'm so glad you're with us, because something like, and I said, any headline can really move this market today. We were hearing a lot about the Elise IPO, and that stock was crashing, it wasn't received well, and then it took down some of the AI names.

We've since recovered some, but what does the global ETF landscape really look like in the future? Let's start with that.

Dina Ting (0:32)

Yeah, it's interesting to say about what's happening in the US, but outside of the US, opportunity and even return are actually stronger this year. Take an example of Taiwan, right? Which is taking advantage of the AI boom, but we're seeing the next chapter as well. I mean, Taiwan with this over 70% return year to date, and GDP growth at 11%, it's experiencing not only the ability to differentiate in terms of powering the compute piece of the AI, but seeing what effect growing through the economy, with the increase consumer spending, we may be able to see that next chapter looks like for Taiwan.

SPEAKER_1 (1:22)

We look there at FLTW, for example, for Taiwan. Look, the momentum you said is building, right?

Not fading. So even though we get these headlines that do cause sometimes pullbacks, for example, last week, the NASDAQ didn't do very well, but the big picture is people still have an appetite for AI, AI demand, everything. They want a little bit of everything, you know, nothing is sort of terribly negative for years, on the contrary, right? There's still, do you think the momentum's still moving forward and there's inflows into these ETFs?

Dina Ting (1:56)

Yeah, you definitely see the momentum with the flows of about 47 billion year to date, and about 18% of that is actually just the last month. So that momentum is building and that part of the compute, the demand has been building up for two to three years. So it's not something that will disappear next year, because all the company who was trying to kind of get that compute capacity, they have to make the allocation, and the allocation three years ahead. What you mentioned, it comes from multiple different locations, right? In the US itself, for the US listed ETF, we are seeing a very strong flow for like, say, Franklin's FLTW, like you said, but also in the industry. So locally, for Taiwan this year, they're also experiencing an even bigger net flows year to date. So those numbers combined is showing that, hey, this is a way to kind of differentiate from like, the AI models that is dominating more of the US market into the AI compute, which is like the bottom layer of that AI infrastructure moving forward. And I think the knowledges or even like Taiwan's positioning with the emerging market has been changing as well, right? So if you look at emerging markets, Taiwan used to be probably in the top five, but now they are among the biggest in the emerging markets. So that shows capital allocation, whether people invest directly into the country or part of the broader emerging market.

SPEAKER_1 (3:39)

You talked about China inflows being back, and that seems like good news there. You have FLCH. You also have a few other countries that you were focusing on from South Korea, Japan, and Brazil.

I'm guessing we'll have time for one more response. So I would like to know which one you think is the most interesting at this time.

Dina Ting (4:00)

I think the most interesting one is closer to us in the Americas. So FLBR Brazil. As you know, Brazil is going through election that is tightly contested currently.

We will see differentiation between the two candidates in terms of where the reforms and where things are going to be.

I think one thing interesting about Brazil is also they are on a different path in terms of the interest rate cycle. Many countries such as the US are on the up interest rate cycle while the Brazil has been on the way down. So that could help propel the economy. I think if you look at globally, the industry or the sector that makes up Brazil is quite different. So you don't see technology dominance. You see materials, you see financial also. It's quite a good diversification. I think once we're past the uncertainties of Brazil, you will see things are moving. So they'll be trading more based on their fundamentals, which is based on the energy and also for the growth of the sector as well. And also on the electrification, right? They will be powering the electric grid as well as the largest economy in South America.